<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004
                           ---------------------------

(Mark One)

[ X ]                               FORM 10-Q
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                For the Quarterly Period Ended December 31, 2002
                                               -----------------

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[  ]                 OF THE SECURITIES EXCHANGE ACT OF 1934

     For the Transition Period from                      to
                                    --------------------    -------------------

     Commission File Number                  0-13084
                           ----------------------------------------------------

                             WARRANTECH CORPORATION
     --------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                  13-3178732
     --------------------------------------------------------------------------
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                  Identification No.)

      2220 Highway 121, Suite 100 Bedford, TX                     76021
     --------------------------------------------------------------------------
     (Address of principal executive offices)                  (Zip Code)

     Registrant's telephone number, including area code    (800) 544-9510
                                                       ------------------------

 ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [ X ]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

             Class                              Outstanding at January 31, 2003
----------------------------------------        --------------------------------
Common stock, par value $.007 per share                 15,318,353 shares


<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES


                                    I N D E X
                                    ---------
<TABLE>
<CAPTION>

                                                                                     Page No.
                                                                                     --------
                         PART I - Financial Information:

<S>                                                                                     <C>
  Item 1:  Financial Statements


      Condensed Consolidated Statements of Operations -
             For the Three Months and Nine Months Ended
             December 31, 2002 and 2001 (Unaudited)................................      3

      Condensed Consolidated Balance Sheets at December 31, 2002
             (Unaudited) and March 31, 2002........................................      4

      Condensed Consolidated Statements of Cash Flows
             For the Nine Months Ended December 31, 2002
             and 2001 (Unaudited)...................................................     6

      Notes to Condensed Consolidated Financial Statements (Unaudited).............      7

  Item 2:  Management's Discussion and Analysis of
             Financial Condition and Results of Operations ........................     11

  Item 3: Quantitative and Qualitative Disclosures about Market Risk ..............     17

  Item 4:  Controls and Procedures.................................................     17


                          PART II - Other Information

  Item 1:  Legal Proceedings.......................................................     18

  Item 2:  Changes in Securities...................................................     20

  Item 3:  Defaults Upon Senior Securities.........................................     20

  Item 4:  Submission of Matters to a Vote of Security Holders.....................     20

  Item 5:  Other Information.......................................................     20

  Item 6:  Exhibits and Reports on Form 8-K........................................     20

  Certification of Financial Report................................................     21

  Signature .......................................................................     23

</TABLE>
                                       2
<PAGE>

ITEM 1. FINANCIAL STATEMENTS


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   For the Three Months Ended              For the Nine Months Ended
                                                           December 31,                           December 31,
                                                ----------------------------------   --------------------------------------
                                                     2002               2001               2002                 2001
                                                ----------------   ---------------   ------------------   -----------------
<S>                                                  <C>               <C>                 <C>                 <C>
Earned administrative fee (net of amortization       $9,339,050        $8,549,955          $28,303,751         $27,043,540
of deferred costs)
Costs and expenses
   Service, selling, and general and
   administrative                                     7,404,622         7,394,418           22,501,844          23,242,498
   Legal settlement                                           -                 -                    -            (824,332)
   Depreciation and amortization                        835,427           737,360            2,880,081           3,439,123
                                                ----------------   ---------------   ------------------   -----------------
Total costs and expenses
                                                      8,240,049         8,131,778           25,381,925          25,857,289
                                                ----------------   ---------------   ------------------   -----------------

Income from operations                                1,099,001           418,177            2,921,826           1,186,251
Other income                                            228,900           357,627              795,409             698,623
                                                ----------------   ---------------   ------------------   -----------------


Income before provision for income taxes              1,327,901           775,804            3,717,235           1,884,874
Provision for income taxes                              306,049           284,600            1,097,456             714,200
                                                ----------------   ---------------   ------------------   -----------------

Net income                                           $1,021,852          $491,204           $2,619,779          $1,170,674
                                                ================   ===============   ==================   =================

Earnings per share:
Basic                                                     $0.07             $0.03                $0.17               $0.08
                                                ================   ===============   ==================   =================

Diluted                                                   $0.07             $0.03                $0.17               $0.08
                                                ================   ===============   ==================   =================


Weighted average number of shares outstanding:
Basic                                                15,359,337        15,243,095           15,341,936          15,221,757
                                                ================   ===============   ==================   =================
Diluted                                              15,643,719        15,243,095           15,484,687          15,221,757
                                                ================   ===============   ==================   =================

</TABLE>


     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                           (Unaudited)
                                                                           December 31      March 31,
                                                                               2002            2002
                                                                           -------------  --------------
 A S S E T S
 -----------
<S>                                                                         <C>             <C>
 Current assets:
 Cash and cash equivalents                                                   $3,258,656      $7,033,448

 Investments in marketable securities                                           693,652         954,653
 Accounts receivable, (net of allowances of $163,366 and $256,019,
 respectively)                                                               22,775,967      18,442,135
 Other receivables, net                                                      12,116,857       4,931,749
 Income tax receivable                                                                -       1,129,076
 Deferred income taxes                                                        1,582,100       2,653,000
 Prepaid expenses and other current assets                                    1,059,929         600,944
                                                                           -------------  --------------
    Total current assets                                                     41,487,161      35,745,005
                                                                           -------------  --------------

 Property and equipment, net                                                  8,646,736       9,299,713

 Other assets:
 Excess of cost over fair value of assets acquired
 (net of accumulated amortization of $5,825,405)                              1,637,290       1,637,290
 Deferred income taxes                                                        2,329,315       2,329,315
 Deferred direct costs                                                       13,121,964      22,570,930
 Investments in marketable securities                                         1,720,616       1,376,619
 Restricted cash                                                                825,000         825,000
 Split dollar life insurance policies                                         1,025,171         904,172
 Notes receivable                                                             3,788,071       2,818,639
 Other assets                                                                    51,324          44,546
                                                                           -------------  --------------
           Total other assets                                                24,498,751      32,506,511

                                                                           -------------  --------------
                     Total Assets                                           $74,632,648     $77,551,229
                                                                           =============  ==============

</TABLE>



      See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                 (Unaudited)
                                                                 December 31     March 31,
                                                                     2002           2002
                                                                -------------  --------------
 LIABILITIES AND STOCKHOLDERS' EQUITY
 ------------------------------------
<S>                                                             <C>             <C>
 Current liabilities:
 Current maturities of long-term debt and capital lease
 obligations                                                        $636,711        $801,788
 Insurance premiums payable                                       32,847,847      26,470,265
 Income taxes payable                                                 99,153               -
 Accounts and commissions payable                                  6,381,011       6,960,465
 Accrued expenses and other current liabilities                    3,843,572       3,168,666
                                                                -------------  --------------
    Total current liabilities                                     43,808,294      37,401,184
                                                                -------------  --------------

 Deferred revenues                                                22,319,528      33,559,379

 Long-term debt and capital lease obligations                        587,682         957,159

 Deferred rent payable                                               106,077         190,260
                                                                -------------  --------------
    Total liabilities                                             66,821,581      72,107,982
                                                                -------------  --------------

 Commitments and contingencies

 Stockholders' equity:
    Preferred stock - $.0007 par value authorized - 15,000,000
 Shares
      issued  - none at December 31, 2002 and March 31, 2002         -               -
    Common stock - $.007 par value authorized - 30,000,000
 Shares
      issued  - 16,530,324 shares at December 31, 2002 and
      16,525,324 shares at March 31, 2002                            115,714         115,679
    Additional paid-in capital                                    23,748,009      23,745,944
    Loans to directors and officers                              (10,391,920)    (10,163,875)
    Accumulated other comprehensive income, net of taxes             (78,546)        (52,028)
    Retained earnings (deficit)                                   (1,358,053)     (3,977,832)
                                                                -------------  --------------
                                                                  12,035,204       9,667,888
 Treasury stock - at cost, 1,211,969 shares at December 31,
 2002 and 1,212,159 shares at March 31, 2002                      (4,224,137)     (4,224,641)
                                                                -------------  --------------
         Total Stockholders' Equity                                7,811,067       5,443,247
                                                                -------------  --------------

                                                                -------------  --------------
         Total Liabilities and Stockholders' Equity              $74,632,648     $77,551,229
                                                                =============  ==============

</TABLE>



     See accompanying notes to condensed consolidated financial statements.




                                       5
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                    For the Nine Months Ended
                                                                             December 31,
                                                             --------------------------------------------
                                                                    2002                    2001
                                                             --------------------    --------------------
<S>                                                          <C>                      <C>
Cash flows from operating activities:
  Net income                                                     $   2,619,779         $     1,170,674
  Total adjustments to reconcile net income to net cash
     provided by operating activities:                              (2,380,165)              4,621,385
                                                             --------------------    --------------------
Net cash flows provided by operating activities                        239,614               5,792,059
                                                             --------------------    --------------------


Cash flows from investing activities:
  Property and equipment purchased                                  (2,179,395)             (1,179,920)
  Purchases of marketable securities                                  (990,000)               (330,000)
  (Increase) decrease in notes receivable                              188,558                 366,037
  Proceeds from sales of marketable securities                         945,000               1,315,304
                                                             --------------------    --------------------
Net cash provided (used) by investing activities                    (2,035,837)                171,421
                                                             --------------------    --------------------

Cash flows from financing activities:
    Exercise of common stock options and stock grants                    2,100                       -
    Purchases treasury stock                                          (196,698)                      -
    Increase in notes receivable                                    (1,157,990)             (1,748,362)
    Repayments, notes and capital leases                              (625,981)               (561,087)
                                                             --------------------    --------------------
Net cash (used) by financing activities                             (1,978,569)             (2,309,449)
                                                             --------------------    --------------------

Net decrease in cash and cash equivalents                           (3,774,792)              3,654,031

Cash and cash equivalents at beginning of period                     7,033,448               3,001,924
                                                             --------------------    --------------------
Cash and cash equivalents at end of period                       $   3,258,656         $     6,655,955
                                                             ====================    ====================

Supplemental Cash Flow Information:
Cash payments (receipts) for:
   Interest                                                      $     161,501         $       163,924
                                                             ====================    ====================
   Income taxes                                                  $  (1,244,556)        $             -
                                                             ====================    ====================

Non-Cash Investing and financing activities:
    Property and equipment financed through capital leases        $      115,745       $       443,232
    Capital leases refinanced                                     $            -       $       151,727
    Increase in loans to officers and directors                   $     (228,045)      $      (249,794)
    Issuance of treasury stock for services rendered              $      197,202       $        75,927

</TABLE>



     See accompanying notes to condensed consolidated financial statements.



                                       6
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                     ---------------------------------------
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------
                                December 31, 2002
                                   (Unaudited)

1.  THE COMPANY

     Warrantech, through its wholly owned subsidiaries,  markets and administers
     service  contracts  and extended  warranties.  The Company is a third party
     administrator for a variety of  dealer/clients  in selected  industries and
     offers call center and technical  computer  services.  The Company  assists
     dealer/clients   in  obtaining   insurance   policies   from  highly  rated
     independent insurance companies for all contracts and programs offered. The
     insurance   company  is  then  responsible  for  the  cost  of  repairs  or
     replacements for the contracts administered by Warrantech.

     The Company's service contract programs benefit consumers by providing them
     with expanded and/or extended  product  coverage for a specified  period of
     time (and/or mileage in the case of automobiles and recreational vehicles),
     similar to that provided by manufacturers  under the terms of their product
     warranties.  Such coverage generally provides for the repair or replacement
     of the product,  or a component thereof,  in the event of its failure.  The
     Company's service contract programs benefit the dealer/clients by providing
     enhanced  value to the goods and services they offer and by providing  them
     with the opportunity for increased revenue and income while outsourcing the
     costs and responsibilities of operating an extended warranty program.

     The terms of the service  contracts,  extended  warranties and  replacement
     contracts generally range from three (3) to eighty-four (84) months.  Since
     the Company  acts solely as a third  party  administrator  on behalf of the
     dealer/clients   and  insurance   companies,   the  actual  repairs  and/or
     replacements  required  under the  agreements  are performed by independent
     third party  authorized  repair  facilities  or dealers.  The cost of these
     repairs is generally  paid for by the  insurance  companies  which have the
     ultimate  responsibility  for the claims or by Butler Financial  Solutions,
     LLC  ("Butler"),  where  Reliance  Insurance  Company  ("Reliance")  or the
     Company  are  the   obligor.   The   insurance   policy   indemnifies   the
     dealer/clients  against losses  resulting from service  contract claims and
     protects the consumer by ensuring their claims will be paid.


2.  BASIS OF PRESENTATION

     The accompanying  consolidated  financial  statements have been prepared by
     management and are unaudited.  These interim financial statements have been
     prepared on the basis of accounting  principles  generally  accepted in the
     United States of America  ("GAAP") for interim  financial  information  and
     with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
     Accordingly,  they do not include all information and footnotes required by
     accounting  principles  generally  accepted in the United States of America
     for  complete  financial  statements.  In the  opinion of  management,  all
     adjustments  (consisting of normal recurring accruals) considered necessary
     for a fair presentation of the financial  position and operating results of
     the Company for the interim  period have been included.  Operating  results
     for the three  months  and nine  months  ended  December  31,  2002 are not
     necessarily  indicative  of the results that may be expected for the fiscal
     year  ending  March  31,  2003.  For  further  information,  refer  to  the
     consolidated  financial  statements and footnotes  thereto  included in the
     Company's Annual Report on Form 10-K for the year ended March 31, 2002.


3.   NOTES RECEIVABLE

     Butler  serves  as  the  ultimate  obligor  under  all  service   contracts
     administered  by the  Company in  exchange  for a fee.  Some of the service
     contracts  under which Butler is the obligor were insured by Reliance,  and
     the liquidation of Reliance has eliminated the insurance coverage to Butler
     under those  contracts.  The Company was also the obligor under some of the


                                       7
<PAGE>

     service  contracts  insured by  Reliance,  but,  pursuant  to an  agreement
     entered  into between the Company and Butler,  Butler  agreed to assume the
     obligations of the Company under those service contracts.

     In order to assist Butler in addressing its potential obligations under the
     service  contracts  previously  insured by Reliance  for which Butler is or
     Warrantech was the obligor,  the Company has made a loan to Butler and will
     make further loans to Butler, as required,  for claim obligations in excess
     of Butler's fee revenues.  All of Warrantech's loans to Butler bear or will
     bear  interest  at the rate of prime plus 2% per annum and will begin to be
     paid down once Butler's fee revenues exceed the claims obligations.

     Additionally,  funding  will be  provided  by a  special  surcharge  on all
     vehicle service  contracts  administered by the Company sold after November
     19,  2001.  This  funding  will be  utilized  by Butler  to pay the  claims
     previously insured by Reliance and will also be available to repay Butler's
     loans from Warrantech.

     As of the period  ended  December 31, 2002,  Warrantech  has loaned  Butler
     $11,949,123, including $190,277 of interest. Pursuant to the GAIC agreement
     (see  Liquidity and Financial  Resources),  the Company  expects to receive
     $8,110,178  of that amount prior to the end of fiscal 2003.  This amount is
     reflected in "Other  Receivables" on the  Consolidated  Balance Sheet.  The
     remaining  $3,838,945  of loans  due from  Butler  is  reflected  as "Notes
     Receivable" on the Consolidated Balance Sheet.

     If Butler is unable to cover the claims previously insured by Reliance,  or
     if the Company's  current insurance carrier ceases to provide credit to the
     Company in order to fund  shortfalls  required,  Warrantech  Automotive may
     ultimately be required to honor the claims under those service contracts in
     which  Warrantech  Automotive was the obligor,  which could have an adverse
     effect on the Company's business. As Butler has assumed all the obligations
     and since  management  is not able to  determine  the  Company's  potential
     claims liability, if any, under such contracts, the Company has not taken a
     reserve for claims losses for which the Company may ultimately be liable.


4.   OTHER RECEIVABLES, NET

     The nature and amounts of other  receivables,  net as of December  31, 2002
     and March 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                                                        December 31,         March 31,
                                                                            2002                2002
                                                                      ----------------    ----------------
<S>                                                                  <C>                   <C>
               Due from Reliance Warranty Corporation                      $8,110,178          $2,754,691
               Due from insurance companies/dealers                         3,575,887           1,795,972
               Employee/agent advances                                        229,570             334,198
               Other                                                          201,222              46,888
                                                                      ----------------    ----------------
               Total Other Receivables, net                               $12,116,857          $4,931,749
                                                                      ================    ================
</TABLE>

     The Company  advanced  $8,110,178 and $2,754,691,  at December 31, 2002 and
     March 31, 2002, respectively,  to Butler on certain claims which it expects
     to receive reimbursement prior to the end of fiscal year 2003.

5.   COMPREHENSIVE INCOME

     Comprehensive  income  includes  net  income  and  certain  items  recorded
     directly to  stockholders'  equity and  classified  as Other  Comprehensive
     Income.  The following table  illustrates the calculation of  comprehensive
     income for the three month and nine month periods  ended  December 31, 2002
     and 2001,  respectively.  During the three months ending December 31, 2002,
     the foreign  currency  rate in Chile  increased  and  resulted in a $72,307
     unrealized loss to comprehensive  income for foreign  currency  translation
     adjustments.




                                       8
<PAGE>

<TABLE>
<CAPTION>


                                                      For the Three Months Ended                  For the Nine Months Ended
                                                             December 31,                                December 31,
                                                ----------------------------------------   --------------------------------------
                                                      2002                2001                2002            2001
                                                ------------------  --------------------   ------------    -----------
<S>                                                    <C>                  <C>             <C>            <C>
Net income                                             $1,021,852           $491,204        $2,619,779     $1,170,674
Other Comprehensive Income, net of tax
   Unrealized gain (loss) on investments                 (10,086)             36,054            20,123          8,700
   Foreign currency translation adjustments                72,307           (31,915)          (46,641)        (2,052)
                                                ------------------  -----------------      ------------    -----------
Comprehensive Income                                   $1,084,073           $495,343        $2,593,261     $1,177,322
                                                ==================  =================      ============    ===========

Comprehensive income per share:                             $0.07              $0.03             $0.17          $0.08
                                                ==================  =================      ============    ===========
</TABLE>


The components of accumulated  comprehensive income, net of related tax, for the
periods ended December 31, 2002 and March 31, 2001, are as follows:
<TABLE>
<CAPTION>

                                                  December 31,         March 31,
                                                      2002                2002
                                                ------------------  --------------------
<S>                                                       <C>                 <C>
Unrealized gain/ (loss) on investments                    $24,456             $4,333
Accumulated translation adjustments                     (103,002)           (56,361)
                                                ------------------  -----------------
Accumulated other comprehensive income                  ($78,546)          ($52,028)
                                                ==================  =================
</TABLE>


6.   EARNINGS PER SHARE

     The computations of earnings per share are as follows:
<TABLE>
<CAPTION>


                                                      For the Three Months Ended           For the Nine Month Ended
                                                             December 31,                        December 31,
                                                   ----------------------------------    -----------------------------
                                                        2002               2001             2002             2001
                                                   ----------------   ---------------    ------------    -------------
<S>                                                  <C>               <C>                <C>             <C>
Numerator:
   Net income applicable to common stock                $1,021,852          $491,204      $2,619,779       $1,170,674
                                                   ================   ===============    ============    =============
Denominator:
    Average outstanding shares used in the
    computation of per share earnings:
      Common Stock issued-Basic shares                  15,359,337        15,243,095      15,341,936       15,221,757
      Stock Options (treasury method)                      284,382           -               142,751           -
                                                   ----------------   ---------------    ------------    -------------
      Diluted shares                                    15,643,719        15,243,095      15,484,687       15,221,757
                                                   ================   ===============    ============    =============
Earnings Per Common Share:
   Basic                                                     $0.07             $0.03           $0.17            $0.08
                                                   ================   ===============    ============    =============
   Diluted                                                   $0.07             $0.03           $0.17            $0.08
                                                   ================   ===============    ============    =============
</TABLE>

7.   DIRECTOR LOANS

     On  July 6,  1998,  Joel  San  Antonio,  Warrantech's  Chairman  and  Chief
     Executive  Officer,  and William  Tweed and Jeff J.  White,  members of the
     Board of Directors, exercised options to purchase an aggregate of 3,000,000
     shares  of  Common  Stock in  consideration  for the  delivery  of  secured
     recourse  promissory  notes totaling  $8,062,500 with interest payable over
     three years at an annual  interest  rate of 6%. On March 22, 1999,  Mr. San
     Antonio  signed an  additional  promissory  note for  $595,634,  the amount
     funded by the Company for payroll  taxes  payable by him as a result of his
     exercise  of these  options.


                                       9
<PAGE>

     In February 2000,  the Company  agreed to restructure  the loans to Messrs.
     Tweed and White by  capitalizing  the interest due and  extending  the loan
     maturity  date from July 5, 2001 until  January 31,  2005.  Interest on the
     restructured loans accrued annually at the applicable federal rate of 6.2%.
     Under  the  restructuring,  interest  first  became  payable  on the  third
     anniversary of the  restructuring and was payable annually  thereafter.  In
     July 2002,  the Company  extended the loan maturity dates until February 1,
     2007 (the "loan extension").  The interest which accrued on the notes up to
     the time of the loan extension was added to the principal of the notes. The
     new principal  amount of Mr.  Tweed's note is $3,189,675 and of Mr. White's
     note is  $2,912,430.  The  applicable  federal  interest  rate on the notes
     following the loan extension is 4.6%. Under the loan extension, interest on
     the notes will accrue until February 1, 2005 and, at that time, the accrued
     interest will be added to the  principal of the notes.  Interest on the new
     principal amounts will thereafter become payable annually until maturity.

     In February 2000,  the Company also agreed to restructure  the two existing
     loans to Mr. San  Antonio  (as  restructured,  the  "Combined  Loan").  The
     Combined  Loan,  finalized  in March 2001,  was due on January 31, 2005 and
     accrued  interest  annually at 5.2%. In July 2002, the Company extended the
     loan maturity date until February 1, 2007 and the interest rate was changed
     to the now applicable federal rate of 4.6%. The principal amount of Mr. San
     Antonio's  note is  $4,165,062.  Interest  will be forgiven and included as
     compensation  as long as Mr. San  Antonio  continues  to be employed by the
     Company

8.   SEGMENT INFORMATION

     The Company operates in three major business segments: Automotive, Consumer
     Products and  International.  Other includes  general  corporate income and
     expenses,  inter-segment  sales and expenses and other corporate assets not
     related to the three business segments.

<TABLE>
<CAPTION>

                                                Consumer                     Reportable
Three Months Ended             Automotive       Products    International     Segments        Other          Total
---------------------------    -----------      ---------   -------------    ----------       ------         -----
December 31, 2002
-----------------
<S>                               <C>            <C>              <C>          <C>             <C>           <C>
Earned administrative fee         $4,080,070     $4,458,680       $872,352     $9,411,102      ($72,052)     $9,339,050
Profit (loss) from operations      2,052,235      1,011,842         55,025      3,119,102    (2,020,101)      1,099,001
Pretax Income (Loss)                 614,976        452,516         53,820      1,121,312        206,589      1,327,901
Net Interest Income                   11,050          4,879            726         16,655        207,320        223,975
Depreciation/Amortization             89,623        399,608         21,721        510,952        324,475        835,427

December 31, 2001
-----------------
Earned administrative fee         $4,085,973     $4,334,599       $252,948     $8,673,520     ($123,565)     $8,549,955
Profit (loss) from operations      2,371,997        384,187      (422,394)      2,333,790    (1,915,613)        418,177
Pretax Income (Loss)               1,267,119      (221,108)      (374,944)        671,067        104,737        775,804
Net Interest Income                   15,298         38,119          6,981         60,398        136,702        197,100
Depreciation/Amortization             84,768        376,195         18,059        479,022        258,338        737,360

Nine Months Ended
-----------------------------
December 31, 2002
-----------------
Earned administrative fee        $14,591,575    $11,600,939     $2,349,442    $28,541,956     ($238,205)    $28,303,751
Profit (loss) from operations      8,656,133      1,571,488         75,092     10,302,713    (7,380,887)      2,921,826
Pretax income (loss)               3,287,457      (275,002)         69,565      3,082,020        635,215      3,717,235
Net interest income                       20        (8,818)          7,567        (1,231)        524,160        522,929
Depreciation/amortization            284,360      1,276,497         64,480      1,625,337      1,254,744      2,880,081
Total Assets                      40,231,095     25,268,416      3,314,225     68,813,736      5,818,912     74,632,648

December 31, 2001
-----------------
Earned administrative fee        $12,512,742    $12,767,819     $2,166,643    $27,447,204      (403,664)    $27,043,540
Profit (loss) from operations      7,013,121      (839,925)      (236,419)      5,936,777    (4,750,526)      1,186,251
Pretax Income (Loss)               4,510,382    (2,683,592)      (491,873)      1,334,917        549,957      1,884,874
Net Interest Income                   49,510         44,268         18,177        111,955        553,481        665,436
Depreciation/Amortization            288,674      1,234,189         55,810      1,578,673      1,860,450      3,439,123
Total Assets                      32,988,790     36,384,644      3,693,341     73,066,775      4,466,249     77,533,024

</TABLE>

                                       10
<PAGE>

                     WARRANTECH CORPORATION AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

EXCEPT FOR THE HISTORICAL  INFORMATION  CONTAINED HEREIN,  THE MATTERS DISCUSSED
BELOW  OR  ELSEWHERE  IN  THIS  QUARTERLY  REPORT  MAY  CONTAIN  FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES  THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE FORWARD-LOOKING  STATEMENTS.
THE COMPANY MAKES SUCH  FORWARD-LOOKING  STATEMENTS  UNDER THE PROVISIONS OF THE
"SAFE HARBOR" SECTION OF THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF 1995.
FORWARD-LOOKING STATEMENTS REFLECT THE COMPANY'S VIEWS AND ASSUMPTIONS, BASED ON
INFORMATION  CURRENTLY  AVAILABLE TO MANAGEMENT.  SUCH VIEWS AND ASSUMPTIONS ARE
BASED ON, AMONG OTHER THINGS, THE COMPANY'S OPERATING AND FINANCIAL  PERFORMANCE
OVER RECENT  YEARS AND ITS  EXPECTATIONS  ABOUT ITS BUSINESS FOR THE CURRENT AND
FUTURE  FISCAL  YEARS.  ALTHOUGH  THE  COMPANY  BELIEVES  THAT THE  EXPECTATIONS
REFLECTED IN SUCH  FORWARD-LOOKING  STATEMENTS  ARE  REASONABLE,  IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS  WILL PROVE TO BE CORRECT.  SUCH STATEMENTS ARE
SUBJECT TO CERTAIN RISKS,  UNCERTAINTIES  AND  ASSUMPTIONS,  INCLUDING,  BUT NOT
LIMITED  TO,  (A)  PREVAILING   ECONOMIC   CONDITIONS  WHICH  MAY  SIGNIFICANTLY
DETERIORATE,  THEREBY  REDUCING  THE  DEMAND  FOR  THE  COMPANY'S  PRODUCTS  AND
SERVICES,  (B) AVAILABILITY OF TECHNICAL  SUPPORT  PERSONNEL OR INCREASES IN THE
RATE OF TURNOVER OF SUCH  PERSONNEL,  RESULTING FROM  INCREASED  DEMAND FOR SUCH
QUALIFIED  PERSONNEL,  (C)  CHANGES IN THE TERMS OR  AVAILABILITY  OF  INSURANCE
COVERAGE FOR THE COMPANY'S  PROGRAMS,(D)  REGULATORY OR LEGAL CHANGES  AFFECTING
THE COMPANY'S  BUSINESS,  (E) LOSS OF BUSINESS  FROM, OR  SIGNIFICANT  CHANGE IN
RELATIONSHIPS  WITH,  ANY MAJOR  CUSTOMER  OF THE  COMPANY,  (F) THE  ABILITY TO
SUCCESSFULLY IDENTIFY AND CONTRACT NEW BUSINESS OPPORTUNITIES, BOTH DOMESTICALLY
AND  INTERNATIONALLY,  (G) THE ABILITY TO SECURE  NECESSARY  CAPITAL FOR GENERAL
OPERATING OR EXPANSION  PURPOSES,(H)  ADVERSE OUTCOMES OF  LITIGATION,(I) IF THE
DIRECTOR(S)  NOTES DUE IN 2007 CANNOT BE COLLECTED,  (J) IF ANY OF THE INSURANCE
COMPANIES WHICH INSURE THE SERVICE  CONTRACTS  MARKETED AND  ADMINISTERED BY THE
COMPANY WERE UNABLE TO PAY THE CLAIMS UNDER THE SERVICE CONTRACTS, IT COULD HAVE
AN ADVERSE  EFFECT ON THE COMPANY'S  BUSINESS,  (K) IF BUTLER IS UNABLE TO COVER
THE CLAIMS PREVIOUSLY INSURED BY RELIANCE, OR IF THE COMPANY'S CURRENT INSURANCE
CARRIER  CEASES TO PROVIDE CREDIT TO THE COMPANY IN ORDER TO FUND ANY SHORTFALLS
REQUIRED,  WARRANTECH  AUTOMOTIVE MAY ULTIMATELY BE REQUIRED TO HONOR THE CLAIMS
UNDER THOSE SERVICE  CONTRACTS IN WHICH  WARRANTECH  AUTOMOTIVE  WAS THE OBLIGOR
WHICH COULD HAVE A MATERIALLY  ADVERSE EFFECT ON THE COMPANY'S  BUSINESS;  SINCE
MANAGEMENT IS NOT ABLE TO DETERMINE THE COMPANY'S POTENTIAL CLAIMS LIABILITY, IF
ANY, THE COMPANY MAY ULTIMATELY BE LIABLE;  (L) PAYMENT OF THE COMPANY'S  "OTHER
RECEIVABLES" IN THE AMOUNT OF $8,110,178 BY THE END OF THE COMPANY'S FISCAL YEAR
THAT IS CONTINGENT ON GREAT  AMERICAN  INSURANCE  COMPANY  CONSUMMATING  CERTAIN
TRANSACTIONS  WITH THIRD  PARTIES;  AND SHOULD ONE OR MORE OF THESE OR ANY OTHER
RISKS  OR  UNCERTAINTIES  MATERIALIZE  OR  DEVELOP  IN A MANNER  ADVERSE  TO THE
COMPANY, OR SHOULD THE COMPANY'S UNDERLYING ASSUMPTIONS PROVE INCORRECT,  ACTUAL
RESULTS OF OPERATIONS,  CASH FLOWS OR THE COMPANY'S FINANCIAL CONDITION MAY VARY
MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR EXPECTED.



                                       11
<PAGE>



Results of Operations
---------------------

THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2001

Gross Revenues for the quarter ended December 31, 2002 were $37,386,939 compared
to  $29,516,536  for the same period last year,  increasing  27%.  All  business
segments  reported  increased  gross  revenues for the three month quarter ended
December 31, 2002 versus the same period last year.

Net earned  administrative  fees are gross  revenues  less the  combined  sum of
premiums,  commissions,  sales  allowances and deferred  revenue.  For the three
month period ended December 31, 2002, net earned  administrative  fees increased
to  $9,339,050  as compared  to  $8,549,955  for the same  period last year,  an
increase of $789,095 or 9%. The  Consumer  Products and  International  segments
recorded  increases  in net earned  administrative  fees,  while the  Automotive
segment remained flat.

Although the  Automotive  segment net earned  administrative  fees from existing
customers was up $351,292 for the quarter  ending  December 31, 2002 compared to
the same quarter last year, it was offset by lower deferred  revenues from prior
periods recognized this quarter versus the same quarter last year of $357,195.

The Consumer Products segment net earned  administrative fees increased $124,081
to $4,458,680  for the three month period ended December 31, 2002 as compared to
$4,334,599  for the same  period last year.  Gross  revenue  increases  from the
segment's top five customers were partially offset by the loss of a customer and
from lower deferred  revenues from prior periods  recognized this quarter versus
the same quarter last year.

The International  segment net earned  administrative fees increased to $872,352
for the three month  period ended  December 31, 2002 from  $252,948 for the same
period a year ago. Increased market penetration from existing customers in South
America  offset the loss of a large  customer  in Chile.  Puerto Rico net earned
administrative  fees  increased  32%  during  the  quarter  on the  strength  of
increased market penetration from existing automotive customers.

Service,  selling and general and administrative  expenses (SG&A), for the three
months ended December 31, 2002 were flat at $7,404,622 as compared to $7,394,418
for the three months ended  December 31, 2001.  Legal fees were $139,669  higher
for the three  months  ended  December  31,  2002 as  compared to the prior year
quarter,  primarily  due to  ongoing  litigation  expenses  related  to  several
lawsuits.   Reflecting  the  Company's  continued  cost  containment   measures,
consulting  fees were down  $379,709 or 64% from  $595,400 in the quarter  ended
December 31, 2001 to $215,691 in the current quarter and telephone expenses were
reduced 42% from $604,815 in the quarter ended  December 31, 2001 as compared to
$347,027 in the current quarter.

Depreciation and amortization  expenses increased by $98,067 to $835,427 for the
three months ended December 31, 2002 as compared to $737,360 for the same period
last year.

Income from  operations  for the third  fiscal  quarter 2003 was  $1,099,001  as
compared  to  $418,177  for the third  fiscal  quarter  2002,  as the  Company's
Consumer  Products and  International  segments  increased their volumes and net
earned administrative fees.

Other  income for the three  months  ended  December  31,  2002 was  $228,900 as
compared to $357,627 for the three months ended  December 31, 2001. The decrease
was  primarily  due to the  receipt  of a rebate  from the use of the  Company's
purchase card in the quarter ended December 31, 2001.

Net income for the three months ended  December 31, 2002 was $1,021,852 or $0.07
per  diluted  share as  compared  to net income of $491,204 or $0.03 per diluted
share for the comparable  period last year; a 108% increase.  This change is the
result of factors as described above


                                       12
<PAGE>


NINE MONTHS ENDED  DECEMBER 31, 2002 COMPARED TO THE NINE MONTHS ENDED  DECEMBER
31, 2001

Gross  Revenues  for the nine months ended  December 31, 2002 were  $109,745,414
compared  to  $84,054,968  for  the  same  period  last  year,  increasing  31%.
Automotive,  Consumer  Products and International  segments  reported  increased
gross revenues of 45%, 3% and 18% respectively,  in the nine months period ended
December 31, 2002 over the same period last year.

Net earned  administrative  fees are gross  revenues  less the  combined  sum of
premiums,  commissions,  sales  allowances  and  deferred  revenue.  Net  earned
administrative  fees for the nine month period ended December 31, 2002 increased
to  $28,303,751 as compared with  $27,043,540  for the same period last year, an
increase of  $1,260,211  or 5%. A 45% increase in the  Automotive  segment gross
revenue was reduced by lower deferred revenues from prior periods  recognized in
the first nine months of fiscal 2003 versus the same period in fiscal 2002.

The Automotive segment net earned  administrative  fees increased  $2,078,833 or
17% to  $14,591,575  for the nine month  ending  December 31, 2002 from the same
period last year. A 46% increase in the number of contracts sold  contributed to
this increase.  The increase  generated by higher volume was partially offset by
higher premium cost and lower deferred revenues from prior periods recognized in
the nine months ended December 31, 2002 versus the same period last year.

The  Consumer  Products  segment  net  earned   administrative   fees  decreased
$1,166,880  or 9% to  $11,600,939  for the nine month period ended  December 31,
2002 as compared to  $12,767,819  for the same period last year.  The change was
primarily attributed to lower deferred revenues from prior periods recognized in
the current fiscal year versus the same period in the prior year.

The International segment net earned administrative fees increased to $2,349,442
for the nine month period ended  December 31, 2002 from  $2,166,643 for the same
period a year ago. Increased market penetration from existing customers in South
America and Puerto Rico offset the loss of a large customer in Chile.

SG&A for the nine months ended  December 31, 2002 were down 3% to $22,501,844 as
compared to $23,242,498  for the nine months ended December 31, 2001,  excluding
an $824,332 legal settlement the Company  received in the prior year.  Increased
legal  expenses of  $1,771,747  for the nine months  ended  December 31, 2002 as
compared to the nine months ended  December 31, 2001,  primarily  due to ongoing
litigation  expenses  related to several  lawsuits were offset by lower employee
cost and  telephone  cost this year.  Reflecting  the Company's  continued  cost
containment  measures,  employee costs were down $575,170 or 4% from $13,776,370
in the nine months  ended  December  31, 2001 to  $13,201,200,  while  telephone
expenses were reduced 40% or $788,500  from  $1,968,964 in the nine months ended
December 31, 2001 as compared to  $1,180,464  in the nine months ended  December
31, 2002.

Depreciation  and  amortization  expenses were reduced by $559,042 to $2,880,081
for the nine months ended  December 31, 2002 as compared to  $3,439,123  for the
same period last year.  The decrease in  depreciation  and  amortization  is the
result of the  Company's  assets  maturing  and  continued  reduction of capital
expenditures for the past few years.

Income from operations for the nine month ended December 31, 2002 was $2,921,826
as  compared  to a  $1,186,251  for the same  period in 2001,  as the  Company's
Automotive   segment   increased  its  volumes  and  the  Company   reduced  its
depreciation and amortization expense.

Other  income for the nine  months  ended  December  31,  2002 was  $795,409  as
compared to $698,623 for the nine months ended  December 31, 2001.  The increase
was primarily due to interest earned on the Butler note receivable.



                                       13
<PAGE>

Net income for the nine months ended  December 31, 2002 was  $2,619,779 or $0.17
per diluted  share as compared to net income of  $1,170,674 or $0.08 per diluted
share for the comparable  period last year; a 224% increase.  This change is the
result of factors as described above.

Liquidity and Financial Resources
---------------------------------

During the nine months ended  December 31, 2002,  the Company had a net decrease
in cash and cash  equivalents  of  $3,774,792.  Working  capital  was a negative
$2,321,133 at December 31, 2002  compared to a negative  $1,656,179 at March 31,
2002. The Company believes that internally generated funds,  resulting primarily
from maintaining its average days outstanding  accounts,  the $3 million line of
credit  secured  from GAIC and the payment of the  $8,110,178  other  receivable
(which  the  Company  anticipates  receiving  pursuant  to  the  GAIC  agreement
described  below),  will be sufficient to finance its current  operations for at
least the next twelve months. The Company is aggressively  pursuing new business
both  domestically  and  internationally  to fund future  working  capital.  The
Company plans to continue to contain its SG&A costs and utilize technologies for
operational  efficiencies to further enhance both its operating  income and cash
flows from operating activities.

On October 9, 2002,  the  Company  executed  an  agreement  with Great  American
Insurance  Company ("GAIC") that will provide it with extended payment terms and
a $3  million  line of credit  ("GAIC  Agreement").  Under the terms of the GAIC
Agreement,  the receivable of $8,110,178 reflected in "Other Receivables" on the
Consolidated  Balance Sheet will be paid to Warrantech by GAIC in the event that
certain  contingencies  set forth in the GAIC  Agreement  are  satisfied.  While
GAIC's payment of the "Other  Receivable" is contingent on the consummation of a
transaction to which Warrantech is not a party, and certain other  contingencies
set forth in the GAIC Agreement, Warrantech's management has been monitoring the
negotiation  of the  transaction  and currently  expects the  transaction  to be
completed and the receivable amount to be paid by the end of fiscal 2003. All of
the Company's  obligations  to GAIC  pursuant to the GAIC  Agreement are secured
with the Company's accounts receivable.

If the proceeds  acquired by GAIC from RWC are not  sufficient  to cover the RWC
("Reliance Warranty  Corporation")  claims obligations,  Warrantech will use its
restricted cash to indemnify GAIC for any further  obligations which GAIC incurs
to pay the RWC claims  obligations  and to fund further loans to Butler covering
Butler's  obligations under the Reliance claims  obligations.  (See Notes to the
Condensed Consolidated Financial Statements.) The Reliance claims obligations as
well as the RWC obligations,  are covered under the Butler arrangement described
in Note 3 of the Notes to the Condensed Consolidated Financial Statements.

In  consideration of GAIC entering into the GAIC Agreement,  Warrantech  granted
GAIC  an  option  to  purchase  up to  1,650,000  common  shares  of  Warrantech
Corporation at an exercise  price of $2 per share.  The option is exercisable no
earlier  than  January 1, 2006 nor later  than  December  31,  2006 and does not
contain  antidilution  provisions.  In the event that Warrantech  stock does not
trade  above $2 per share for 10  consecutive  trading  days prior to January 1,
2004, the exercise price will be reduced automatically to $1 per share.

The Company  entered into a new ten year office lease during the second  quarter
of fiscal  2003 and  consolidated  its  domestic  operations  into one  facility
located in Bedford, Texas, which is within one mile of its former facilities. As
a result,  the Company's  rent expense will increase  slightly  beginning in the
fourth fiscal quarter,  which will be partially offset by efficiencies gained in
some personnel and telephone costs.

As a  condition  of  obtaining  the office  lease,  the  Company  negotiated  an
irrevocable  standby  letter of credit in the  amount of  $750,000  expiring  in
January 2004. In conjunction with the letter of credit, the Company entered into
a collateral  pledge  agreement  with a financial  institution  and  transferred
long-term  investments  to a trust account in amounts  sufficient to support the
letter of credit.

The Company has ongoing  relationships  with equipment  financing  companies and
intends  to  continue   financing   certain  future   equipment   needs  through
lease/purchase   transactions.   The  total  amount   financed   through   these
transactions  during the nine months  ended  December  31, 2002 was  $115,745 as


                                       14
<PAGE>

compared to $443,232 during the nine months ended December 31, 2001. The Company
anticipates  that  amounts to be  financed in the  remainder  of fiscal 2003 are
expected to increase, due to the Company's move into its new facilities.

On July 6, 1998,  Joel San Antonio,  Warrantech's  Chairman and Chief  Executive
Officer, and William Tweed and Jeff J. White, members of the Board of Directors,
exercised  options to purchase an aggregate of 3,000,000  shares of Common Stock
in consideration for the delivery of secured recourse  promissory notes totaling
$8,062,500 with interest  payable over three years at an annual interest rate of
6%. On March 22, 1999, Mr. San Antonio signed an additional  promissory note for
$595,634, the amount funded by the Company for payroll taxes payable by him as a
result of his exercise of these options.

In February 2000, the Company agreed to restructure  the loans to Messrs.  Tweed
and White by capitalizing  the interest due and extending the loan maturity date
from July 5, 2001 until  January 31, 2005.  Interest on the  restructured  loans
accrued   annually  at  the   applicable   federal  rate  of  6.2%.   Under  the
restructuring,  interest  first became  payable on the third  anniversary of the
restructuring  and was payable  annually  thereafter.  In July 2002, the Company
extended the loan maturity dates until February 1, 2007 (the "loan  extension").
The interest,  which accrued on the notes up to the time of the loan  extension,
was added to the principal of the notes. The new principal amount of Mr. Tweed's
note is $3,189,675 and of Mr. White's note is $2,912,430. The applicable federal
interest rate on the notes following the loan extension is 4.6%.  Under the loan
extension, interest on the notes will accrue until February 1, 2005 and, at that
time, the accrued interest will be added to the principal of the notes. Interest
on the new principal  amounts will  thereafter  become  payable  annually  until
maturity.

In February 2000, the Company also agreed to restructure  the two existing loans
to Mr. San Antonio (as restructured,  the "Combined  Loan").  The Combined Loan,
finalized  in March  2001,  was due on January  31,  2005 and  accrued  interest
annually at 5.2%.  In July 2002,  the Company  extended the loan  maturity  date
until  February 1, 2007 and the interest rate was changed to the now  applicable
federal  rate of  4.6%.  The  principal  amount  of Mr.  San  Antonio's  note is
$4,165,062. Interest will be forgiven as long as Mr. San Antonio continues to be
employed by the Company. The $223,460 interest, which accrued on the note during
the fiscal year 2002, and the $230,460 of interest,  which accrued from February
1, 2001 through  March 31,  2001,  was  forgiven  and charged to  operations  as
additional  compensation in the respective  fiscal years the interest income was
accrued.

The effects of inflation  have not been  significant  to the  Company.

Critical Accounting Policies
----------------------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
the  disclosure  of  contingent  assets  and  liabilities  at the  dates  of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting periods.  Note 1 to the Consolidated  Financial  Statements in the
Company's  Annual  Report  on Form  10-K  for the year  ended  March  31,  2002,
describes  the  significant   accounting   policies  and  methods  used  in  the
preparation of the Consolidated  Financial Statements.  The following lists some
of the Company's critical accounting policies impacted by judgments, assumptions
and estimates.

Revenue Recognition

The Company's revenue recognition policy is segregated into two distinct methods
depending  on whether  the  Company,  a third  party or the  retailer/dealer  is
designated as the obligor on the service contract sale.

Dealer/third   party   obligor   service   contracts  are  sales  in  which  the
retailer/dealer or a third party is designated as the obligor. For these service
contract  sales,  the  Company  uses  the  proportional  performance  method  to
recognize  revenues in direct  proportion to the costs incurred in providing the
service  contract  programs  to  the  Company's  clients.  Revenues  in  amounts


                                       15
<PAGE>

sufficient  to meet future  administrative  costs and a reasonable  gross profit
thereon are deferred.  Sales of dealer/third party obligor service contracts are
reflected in gross revenues net of premiums paid to insurance companies.

Administrator  obligor  service  contracts  are  sales  in which  Warrantech  is
designated  as the  obligor.  For these  service  contract  sales,  the  Company
recognizes  revenues  over the life of the  contract on a  straight-line  basis,
unless sufficient, company-specific, historical evidence indicates that the cost
of  performing  services  under  these  contracts  are  incurred on other than a
straight-line  basis.  In  determining  the amount of revenue  to  recognize  on
administrative obligor contracts, the Company utilizes the historical data bases
to estimate Company specific  historical  claims experience over the life of the
contract.

Impairment of Long-lived Assets

The Company  assesses  potential  impairment  of its  long-lived  assets,  which
include its property and  equipment  and its  identifiable  intangibles  such as
software development costs,  goodwill and deferred charges under the guidance of
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived  Assets".  The
Company  continually  determines  if a permanent  impairment  of its  long-lived
assets has  occurred and the  write-down  of the assets to their fair values and
charge current operations for the measured impairment is required.

Income Taxes

Deferred tax assets and liabilities  are determined  using enacted tax rates for
the effects of net operating losses and temporary  differences  between the book
and tax  bases of assets  and  liabilities.  The  Company  records  a  valuation
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain  judgments are made relating to  recoverability  of deferred tax assets,
use of tax loss  carryforwards,  level of  expected  future  taxable  income and
available tax planning  strategies.  These  judgments are routinely  reviewed by
management.  At  December  31,  2002,  the Company  had  deferred  tax assets of
$3,911,415,  net of a valuation  allowance of  approximately  $473,130  based on
projected net loss  carryforwards.  For further  discussion,  see Note 11 to the
Consolidated  Financial  Statements in the Company's  Annual Report on Form 10-K
for the year ended March 31, 2002.




                                       16
<PAGE>



ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk
------------------

As of December  31,  2002,  the Company  did not have any  derivatives,  debt or
hedges outstanding and as such is not subject to interest rate risk. The Company
does maintain  investments  in fixed rate  municipal  bonds.  As interest  rates
fluctuate, the values of the bonds increase or decrease accordingly. The Company
adjusts the carrying value for the bonds to market rate each quarter. Due to the
limited amount of investments and the short term nature of the  investment,  the
Company  considers its interest rate risk to be  insignificant to its results of
operations and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
----------------------------------

The Company's  Chief Executive  Officer (CEO) and Chief Financial  Officer (CFO)
are primarily  responsible for the accuracy of the financial information that is
presented  in the  Quarterly  Report.  Each of them  has,  within 90 days of the
filing date of this report  evaluated  the  Company's  disclosure  controls  and
procedures,  as  defined in the rules of the SEC and have  determined  that such
controls and  procedures  were  effective in ensuring that material  information
relating to the Company and its consolidated subsidiaries was made known to them
during the period covered by this Quarterly Report.

Internal Controls
-----------------

To meet  their  responsibility  for  financial  reporting,  the CEO and CFO have
established  internal controls and procedures,  which they believe, are adequate
to provide  reasonable  assurance  that the Company's  assets are protected from
loss.  These internal  controls are reviewed by the  independent  accountants to
support their audit work. In addition,  the Company's Audit Committee,  which is
composed entirely of outside directors,  meets regularly with management and the
independent  accountants to review  accounting,  auditing and financial matters.
This Committee and the independent  accountants  have free access to each other,
with or without management being present.

There were no  significant  changes in Company's  internal  controls or in other
factors that could significantly affect internal controls subsequent to the date
of the CEO's and CFO's most recent evaluation.



                                       17
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

ACE Property and Casualty Insurance Company
-------------------------------------------

IN THE MATTER OF THE  ARBITRATION  BETWEEN ACE PROPERTY  AND CASUALTY  INSURANCE
COMPANY  F/K/A CIGNA  PROPERTY  AND  CASUALTY  INSURANCE  COMPANY V.  WARRANTECH
CORPORATION,  WARRANTECH CONSUMER PRODUCT SERVICES,  INC., WCPS OF FLORIDA, INC.
AND WARRANTECH HELP DESK, INC.

In  accordance  with an  Administrative  Agreement  between  the  various  named
Warrantech  entities  and  CIGNA,  ACE has made a demand  for  arbitration  of a
variety of claims that ACE  asserted  against  Warrantech.  These  claims can be
divided  into two  general  categories.  The first  arises  out of  Warrantech's
administration  of its  service  contract  program  with  CompUSA  prior  to and
immediately following the termination of the relationship between Warrantech and
CompUSA.  The remaining  claims relate to  Warrantech's  general claims handling
procedures.  Although all claims have not been set forth with specificity, it is
evident that ACE is seeking to recover  damages in an amount in excess of twenty
million dollars ($20,000,000).

After a lengthy  standstill  period,  the  parties  have  resumed  discovery  in
preparation for the arbitration  hearing. At this time, no date has been set for
the arbitration.  The parties have engaged in exploratory settlement discussions
but, as of the date of this filing, no definitive agreement has been reached and
it is too  early  to  assess  the  likelihood  that  these  discussions  will be
successful.

WARRANTECH CONSUMER PRODUCT SERVICES, INC. ET AL. ("WARRANTECH") V. ACE PROPERTY
AND CASUALTY INSURANCE COMPANY AND DOES 1-10, INCLUSIVE ("ACE"),  SUPERIOR COURT
OF THE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES.

In November 2002,  Warrantech filed suit against ACE for (i) insurance bad faith
(aka breach of the implied  covenant  of good faith and fair  dealing)  and (ii)
breach of contract.  This  complaint  arises out of ACE's  alleged  unreasonable
delay in paying,  or failure to pay, claims submitted by service providers under
service  contracts  underwritten  by ACE. In a number of  instances,  this delay
and/or  failure  has  resulted  in the  service  provider  filing  suit  against
Warrantech to recover the relevant payments.  Warrantech is seeking compensatory
and punitive damages although no specific amount has been specified.

As of December  13,  2002,  this matter was removed by ACE to the United  States
District Court,  Central District of California,  Western  Division.  ACE is now
moving to have the matter  dismissed,  claiming  that the subject  matter of the
complaint must be arbitrated in accordance with existing  agreements between the
parties.


Michael A. Basone
-----------------

Mr. Basone is a former  Executive Vice President and Chief Operating  Officer of
Warrantech,  having resigned in February 2000.  Several months after  resigning,
Mr.  Basone  contacted  the Company  through his  attorney  and claimed that the
Company's  conduct  was such that he was  forced  to  resign.  For this  alleged
"constructive  termination"  without cause, Mr. Basone sought an amount equal to
what he  would  have  received  had he  completed  the  term  of his  employment
agreement.  The Company believes this assertion is completely  without merit and
has rejected Mr. Basone's demand for payment.  Mr. Basone has filed a Demand for
Arbitration with the American Arbitration  Association that seeks damages in the
amount of $300,000. An arbitration hearing was held on May 13 - 14, 2002 and, on
July 31, 2002, the arbitrator issued his decision. The arbitrator has denied Mr.
Basone's claim and has held that wages  withheld by Warrantech  shall be applied


                                       18
<PAGE>

to offset  amounts owed to  Warrantech  by Mr.  Basone  pursuant to a promissory
note.  Each  party  will be  responsible  for its own  attorney's  fees  and for
one-half of the costs of the arbitrator.

Market West Computer Group
--------------------------

M.W.C.G.,  INC.,  D/B/A/ MARKET WEST COMPUTER GROUP, ON BEHALF OF ITSELF AND ALL
OTHERS  SIMILARLY  SITUATED V. ACE  PROPERTY  AND  CASUALTY  INSURANCE  COMPANY,
WARRANTY CORPORATION OF AMERICA ("WACA"),  WARRANTECH CORPORATION AND WARRANTECH
CONSUMER PRODUCT SERVICES, INC. ("WCPS"),  UNITED STATES DISTRICT COURT, CENTRAL
DISTRICT OF CALIFORNIA (WESTERN DIVISION).

Market  West  is  one  of  many  service   providers  used  by  WCPS  to  repair
computer-related  equipment  pursuant to its service contract program.  When the
administration  of those service  contracts  underwritten by ACE was transferred
from WCPS to WaCA,  many  service  providers  like  Market  West  complained  of
material changes in claim adjustment procedures and unreasonable delays in claim
payment.  Market West filed suit in state court in California  against the named
parties to recover monies it claims to be owed as a result of the repair work it
has performed.

The amount  sought by Market  West  under its  initial  claim was  approximately
$225,000.  Warrantech believed that if the claim were successful,  substantially
all of the amount that is awarded to Market  West would be owed by the  insurers
that  underwrote  the  liability.  Following  removal of the  lawsuit to federal
court,  Market West attempted to have a national class of plaintiffs  certified.
The class  certification  petition  was denied by the court and Market  West was
directed to proceed  with its  individual  claim.  Market West then entered into
settlement  discussions with Warrantech and a settlement  agreement was recently
executed.  Under this  agreement,  Warrantech's  maximum  exposure  is less than
one-half  of the  amount  originally  sought  and  will be  further  reduced  as
Warrantech  processes valid claims through the appropriate  underwriters.  As of
the date of this filing,  Warrantech  has made no additional  payments to Market
West pursuant to its continuing obligations under the settlement agreement.

Lloyd's Underwriters
--------------------

CERTAIN  UNDERWRITERS  AT LLOYD'S,  LONDON AND OTHER  REINSURERS  SUBSCRIBING TO
REINSURANCE   AGREEMENTS   F96/2992/00   AND  NO.   F97/2992/00  V.   WARRANTECH
CORPORATION,  WARRANTECH  CONSUMER  PRODUCT  SERVICES,  INC. AND WARRANTECH HELP
DESK, INC., DISTRICT COURT OF TARRANT COUNTY, TEXAS, 17TH JUDICIAL DISTRICT.

During  the  period  that  Houston  General  was the  underwriter  of certain of
Warrantech's  programs,  it reinsured certain of the underwritten risks with one
or more Lloyd's insurance syndicates. At some point thereafter,  Houston General
commenced  an  arbitration  against  the Lloyd's  syndicates  seeking to recover
approximately  $46,000,000 under the reinsurance treaties with respect to claims
previously  paid by Houston  General on warranty  claims  submitted by customers
under the Warrantech  programs.  The Warrantech entities were not parties in the
arbitration  but were the  subject  of  extensive  discovery  by each of Houston
General and the Lloyd's  syndicates.  The  arbitration  concluded in August 2002
with an award of approximately $39,000,000 in favor of Houston General.

The award  supports  the  assertions  of  Houston  General  with  respect to the
validity  of the  claims  that  it  paid.  Warrantech  was not  involved  in the
selection of these re-insurers,  has no contractual  relationship with them, and
has had no reporting  or other  obligation  to them.  Despite  these facts,  the
Lloyd's  syndicates  now seek to recover some portion of the  arbitration  award
from the Warrantech entities on two theories of liability. The first is that, at
the time  certain  claims were  presented to Houston  General for  payment,  the
Warrantech  entities either  fraudulently or negligently  represented to Houston
General that such claims were valid. The second is that the Warrantech  entities
intentionally  failed to comply with their legal  obligations  to cooperate with
the parties during the discovery process for the arbitration. No specific demand
for damages is contained in the complaint.  The parties are presently engaged in
extensive document discovery and, in particular,  the review of electronic files
and databases.

                                       19
<PAGE>

The Company believes that the ongoing actions  described above are without merit
and it  intends  to defend  them  vigorously.  Since it is not able to  estimate
accurately its potential  liability in either of them, no reserves for potential
liabilities have been provided for these actions.

ITEM 2.       CHANGES IN SECURITIES

              Not applicable.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              Not applicable.

ITEM 4.       SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

              Not applicable

ITEM 5.       OTHER INFORMATION

              Not applicable.

ITEM  6(a). EXHIBITS


    99 (a)   -  CEO Certification Pursuant to 18 U.S.C. Section 1350

    99 (b)   -  CFO Certification Pursuant to 18 U.S.C. Section 1350


ITEM 6(b). REPORTS ON 8-K

              None



                                       20
<PAGE>



                  CERTIFICATION OF CHIEF EXECUTIVE OFFICER PER
                      SECTION 302 OF THE SARBANES-OXLEY ACT

I, Joel San Antonio, certify that:
1.   I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Warrantech
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;



4    This  registrant's  other  certifying  officers and I are  responsible  for
     establishing and maintaining  disclosure  controls and p oced s (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this q arte report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures  as of a date within 90 days prior to the filing te of
          this quarterly report (the "Evaluation Date"); and


     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on o r
          ev ation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):
     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: February 11, 2003          /s/ Joel San Antonio
                                 ----------------------------------------------
                                 Joel San Antonio
                                 Chairman, Chief Executive Officer and Director


                                       21
<PAGE>

                CERTIFICATION OF CHIEF FINANCIAL OFFICER PER
                      SECTION 302 OF THE SARBANES-OXLEY ACT

I, Richard F. Gavino, certify that:
1.   I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Warrantech
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

     4.   Ths registrants's  other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and p s (a defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):
     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: February 11, 2003            /s/ Richard F. Gavino
                                   --------------------------------------------
                                   Richard F. Gavino
                                   Executive Vice President, Chief Financial
                                   Officer and Accounting Officer and Treasurer




                                       22
<PAGE>



                                    SIGNATURE
                                    ---------



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                      WARRANTECH CORPORATION
                      ---------------------------------------------------------
                                     (Registrant)


                      /s/ Richard F. Gavino
                      ---------------------------------------------------------
                      Richard F. Gavino - Executive Vice President, Chief
                      Financial Officer, Chief Accounting Officer and Treasurer
                      (Chief Financial Officer and Duly Authorized Officer)


Dated: February 11, 2003



                                       23
<PAGE>